The federal government is in talks with the World Bank for a $1.5 billion loan to support the budget and also provide liquidity in the forex market.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun stated this in an interview with Bloomberg Tv on the sidelines of the World Economic Forum (WEF) in Davos, Switzerland.
According to the Minister, the reforms with respect to fuel subsidy removal and merger of the foreign exchange market require some form of support from multilateral organisation.
He stated,
- “We’re hoping to get $1 billion or $1.5 billion from the World Bank. It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms.”
- “What we’ve done with fuel subsidies, what we have done in terms of the foreign-exchange market reform, deserve support. We’ve done enough and we deserve to be rewarded imminently.”
Tapping domestic dollar savings to shore up the naira
On the issue of liquidity in the foreign exchange market, the Minister noted that the government’s priority is to stabilise the naira through liquidity. He mentioned that receipts from crude oil sales remain the main source while also looking at domestic dollar savings with and outside the official market.
According to him,
- “The priority is to stabilize the naira, that means getting in the additional liquidity – number one from oil revenue,”
- “We’re also looking to make sure we tap Nigerian savings, in particular domestic dollar savings both inside and outside the formal market. There’s a lot of cash in the Nigerian economy.”
Clearing FX backlog
Furthermore, he noted that the priority of the CBN still remains clearing the FX backlog which he estimates at $5bn.
He said,
- “There is actually liquidity within the banking system and there should be a way of getting the banks to actually help with that backlog, either on a spot or a forward-rate basis,”
- “We believe that if we coral the dollars that are available, we can pay down that backlog almost in one fell swoop.”
The Minister also hinted at Nigeria is contemplating issuing Eurobonds later in the year if the rates are considerably lower stating that major issuers have informed the country of the possibility this year.
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